A lot less money involved, but I remember my boss at the time (we were a small mortgage broker in Eastern Europe) asking me to write a quick Python script that would automatically get the daily Libor number and save it into our DB.
Seeing as I was hearing about Libor all day, every day (almost all of our clients had their mortgages computed on that piece of info), I had expected it to be something “automatic” (like at least an XML thingie) and well documented. Instead I had to parse some html on a page somewhere (I remember some yellow background) and hope that the HTML structure around that Libor figure would remain unchanged.
This was all happening around 2007 - early 2008, suffice is to say that when all the Libor scandal happened a little later on I was not at all surprised.
I remember some internet arguments on Libor when I researched how it was determined and everyone disagreed with me because of how much was based on it.
It's just survey data, and no verification of whether a loan can happen at that rate? And you throw away the lowest rates, which should be the market-clearing rate all-the-things-being-equal if lenders are fungible? And if lenders aren't fungible, then isn't it all apples and oranges?
High finance even fairly recently (80s) was based on handshakes and trust. The value of contracts tied to LIBOR grew by an order of magnitude or two while the definition of LIBOR wasn’t adjusted.
Why wasn’t it fixed? Because replacing it would require an enormous amount of coordination and there was no clear evidence that it was broken. When that changed it finally got replaced by SOFR.
LIBOR was developed in '86. The LIBOR scandal broke in 2012, with evidence of bad conduct going back to '08 or so. The LIBOR to SOFR transition was officially kicked off around 2016. Due to the complexity, the transition took 5 years.
The LIBOR rate-setting mechanism was a reasonable design for the world of 1986 [1], when finance was a smaller club and trust among bankers was higher. Also, it wasn't clear back then that the volume of contracts referencing LIBOR would grow to become many trillions of dollars just a short couple decades later.
When problems finally became very clear, we replaced it.
[1] One criticism often levied at LIBOR is why it sufficed to take a windsorized bank poll instead of looking at something more reliable, such as market transactions. But that's ahistoric: in 1986, banks didn't always do unsecured 3m lending on a daily basis. And later on, banks mostly stopped doing unsecured lending to one another entirely. So critics who suggest that LIBOR should've looked at market transactions entirely miss that finance, actually practiced, is a constantly moving target and it's hard to predict the future when designing benchmarks. SOFR, LIBOR's replacement, looks at secured interbank lending — a practice that was rare when LIBOR was created.
Seeing as I was hearing about Libor all day, every day (almost all of our clients had their mortgages computed on that piece of info), I had expected it to be something “automatic” (like at least an XML thingie) and well documented. Instead I had to parse some html on a page somewhere (I remember some yellow background) and hope that the HTML structure around that Libor figure would remain unchanged.
This was all happening around 2007 - early 2008, suffice is to say that when all the Libor scandal happened a little later on I was not at all surprised.